Americas VLCC rates spike to record highs on bullish fundamentals

Very Large Crude Carrier rates out of the US Gulf Coast hit record highs on Sept. 4 as a tight tonnage list in the Atlantic Basin, coupled with firmer VLCC rates in other global markets, bolstered bullish sentiment.

With increased volatility stemming from ongoing risks and uncertainty surrounding transits through the Strait of Hormuz, charterers have continued to work VLCC cargoes for further-out dates; however, market participants said the position list remained sparse for early- to mid-October loading dates in the USGC.

One shipbroker said that while most charterers "would normally work a bit further ahead typically," there is "very little on the list."

Despite a number of failed fixtures reported, the shrinking position list allowed shipowners to capitalize on bullish fundamentals; the latest deal on the VLCC USGC-East route saw ST Shipping book the Helios for an Oct.13-16 laycan at $29.5 million.

Platts, part of S&P Global Energy, assessed freight for the 270,000 metric ton USGC-China run at the achieved $29.5 million level on Sept. 4, surpassing the previous record of $29.3 million set on March 4.

The Sept. 4 assessment was 21.6% higher on the week, Platts data shows.

Some market players expected rates could rise further.

"I think we will see $30 million before the end of the week," a shipowner said on Sept. 3, before the ST Shipping trade.

Shipowners have also seen further support from rising rates out of the Mediterranean, with participants pointing toward a deal in which Pertamina reportedly booked the C. Progress for a Sept. 16 loading Sidi Kerir-Cilacap run at $29.75 million.

Higher rates in the Med, alongside firming traded levels out of the Persian Gulf, meant "Atlantic Basin and US Gulf [prices] had to correct upwards," a second broker said.

The increased inquiry levels seen in the week ended Sept. 4 have also provided upward momentum, as multiple charterers worked similar laycans in early- to mid-October, competing for ships from the same depleted list.

One shipbroker report said that "with tonnage remaining relatively tight and the current momentum showing little sign of easing, the market is expected to maintain its firm trajectory into next week."

While voyages heading East remained the preference for shipowners, the VLCC USGC-UK/Continent route remained untested; however, rates continued to climb for the transatlantic run in response to the firmer USGC-East rates.

"Sounds like charterers can't make sense of that run on a VLCC at these levels," a third shipbroker said.

Platts assessed the benchmark 270,000 mt USGC-UKC run at $16 million on Sept. 4, also marking a record high, and rising 23% on the week from $13 million on Aug. 31.

Preference for the transatlantic voyage remained with the more economical midsize tankers.

Pressure mounts for Suezmaxes

The significant spike in VLCC rates fostered expectations that Suezmax rates would likely continue to climb, as charterers' preference could shift to the smaller ship class due to better economics.

A fourth shipbroker said that it was currently cheaper to charter two Suezmaxes, so the market may start to see cargoes split.

"When VLCCs are paying almost $30 million for USGC-East, what can we expect from [Suezmax] owners?" a Brazil-based shipbroker said.

While the Americas has yet to see an increase in split cargoes, in West Africa, split VLCC-sized cargoes led to Suezmax positions in the Atlantic Basin to tighten.

"If I was a charterer today, I wouldn't move a finger unless I really needed to," the Brazil-based broker added.